Arizona Public Service Turns Dirt on Aggressive Renewable Energy Construction Program

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--An aggressive, multibillion-dollar renewable energy construction program is progressing in Arizona. Now, the state's largest utility is asking regulators to allow an electric rate increase to pay for the new construction.

"Two years ago, we came together with the Arizona Corporation Commission (ACC) and 21 other stakeholders to create a long-term vision for Arizona's energy future," said Don Robinson, president and chief operating officer at Arizona Public Service Company (APS) (Phoenix, Arizona), a unit of Pinnacle West Capital Corporation (NYSE:PNW) (Phoenix). "That shared vision includes continued upgrades to our power grid, ambitious goals for a cleaner energy supply, and new energy-efficiency programs for our customers. We are meeting those goals and spending about $1 billion each year to create a cleaner, reliable and more efficient energy future for Arizona. Now, we are asking the ACC to continue its support of this plan."

On June 1, APS asked Arizona utility regulators to increase its electric rates by 6.6%, starting next summer, to begin paying for new solar and wind generation. The new generation is being built to meet the terms of a 2009 settlement requiring renewable energy to account for 10% of APS' electricity by 2015. Separately, Arizona enacted a renewable energy standard (RES) that requires utilities to get 15% of their electricity from renewable generation by 2025.

In an earlier statement, Robinson said: "Our customers have told us they want more of their energy to come from renewable sources, and we are responding. Renewable energy will play an increasing role in meeting the energy needs of our customers."

Right now, APS has about 304 megawatts (MW) of renewable generation operating in Arizona and New Mexico. About 3% of its electricity comes from renewable sources. Another 597 MW of renewable generation is under development, APS spokesman Steve Gotfried told Industrial Info. The utility serves more than 1.1 million customers across the state.

APS plans to spend $500 million to build about 89 MW of photovoltaic generation across Arizona, Gotfried said. Customers will own and operate 207 MW of renewable generation. Developers will own the remaining 605 MW of renewable generation and will sell electricity to APS under long-term power purchase agreements. The spokesman could not estimate the size of APS' overall investment in renewable electricity.

The centerpiece of APS' renewables program is the Solana Solar Generating Station, a 280-MW concentrating solar power (CSP) project under construction in Gila Bend, Arizona. When completed in 2013, the project will be one of the world's largest CSP generators. The project has a total investment value of $1.4 billion. Last December, Abengoa Solar (Madrid, Spain), Solana's developer, received a construction loan guarantee from the U.S. Department of Energy (DoE) (Washington, D.C.).

The Solana project is being built on three square miles of what was agricultural land. The generating station will use 75% less water than the crops that were grown there--an important consideration in sun-baked, drought-plagued Arizona. Solana will consist of 2,700 parabolic trough collectors and a thermal energy storage unit that stores heat energy, so that electricity can be generated for up to six hours after the sun sets. Heat energy will be stored in molten salt, for use when customer demand for electricity is high.

Another foundational element of APS' renewable energy program is the Perrin Ranch Windfarm, a 99-MW project under construction near Williams, Arizona. That project, which has a TIV of $215 million, is scheduled to begin operating in 2012. NextEra Energy Resources LLC (NYSE:NEE) (Juno Beach, Florida) is developing that project and will own it.

Gottfried added that APS is purchasing electricity from two windfarms that were built in New Mexico: The 100-MW High Lonesome Mesa Wind Energy project in Torrance County, valued at $170 million, and the 90-MW Aragonne Mesa Windfarm in Guadalupe County. Smaller renewable projects are being developed in the Arizona cities of Phoenix, Prescott, Gila Bend, Glendale, Hyder, and Chino Valley.

In commenting on the utility's request to increase rates, APS President Robinson emphasized his company's commitment to solar energy: "The sun is an abundant resource in Arizona and reduces our need to burn fossil fuels. The funding provided by this rate request will help build a reliable and sustainable energy future for Arizona."

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